Facing a loan rejection from a traditional bank can be disheartening, but it’s important to understand that this is not the end of the road. There are alternative options available in the UK lending market if you have been refused by a bank – particularly if you have an asset such as a home or car with which you could apply for a secured loan.
For instance, using your home as security, Proper Finance could help you borrow £10,000 to £500,000 upfront with rates from 6.5% APR.
Below we have outlined the common reasons behind bank refusals, the impact this can have on your credit scores and how you could benefit from our lending solutions and secure the financial support you need.
Why Has My Loan Application Been Refused By The Bank?
When a bank denies a loan application, it’s usually due to various factors, such as a bad credit score, insufficient income or that you have high existing debt levels. Banks often have tough eligibility criteria, and even a minor discrepancy in the application can lead to rejection.
If you have a history of late payments, defaults or a high debt-to-income ratio, it can harm your creditworthiness in the eyes of traditional lenders. However, by identifying these issues, you can be strategic in improving your credit standing and increase your chances of success in future loan applications.
What Impact Does A Loan Refusal Have On My Credit Score?
One of the immediate concerns for borrowers who face a loan rejection is the impact on their credit score. Each loan application typically results in a hard inquiry on your credit report, and multiple rejections can lead to a lower credit score. A lower credit score, in turn, makes it even more challenging to secure loans from traditional sources.
We don’t recommend applying for multiple loans in a short period of time as this can lead to lenders questioning your ability to repay any debts.
What Types of Refused Credit Loans Are Available?
For borrowers who have faced loan refusals, secured loans offer a potential lifeline. Secured loans require an asset, such as property or a vehicle, to help mitigate the risk for lenders and increase the likelihood of approval for the borrower.
Secured loans are popular with those who have a poor credit history, since having the added security of your home means that the eligibility requirements by lenders are less strict – and the rates you can access can still be affordable.
At Proper Finance we offer secured loans and homeowner loans, which allow you to borrow money against some security you own such as your home, flat or other residential property.
While this refused credit loan option provides access to funds, it is crucial to assess the terms and conditions diligently. Secured loans, while more attainable, require careful consideration to avoid potential risks, including the possibility of losing your asset in case of default.
What Happens If I Cannot Repay My Loan?
Defaulting on loan repayments can have serious consequences, notably impacting your credit score and future borrowing prospects. A series of missed payments may result in a negative impact on your credit report, making it challenging to secure loans in the future. If you have been approved for a secured loan, you may be at risk of repossession if you do not make your repayments long-term.
It is crucial to assess your financial capacity before taking out a loan and consider unforeseen circumstances that may arise. While late payments can occur due to unexpected challenges, it is essential to communicate promptly with your lender.
How Can I Improve My Credit Score?
Having a bad credit score often contributes to loan rejections. Fortunately, there are proactive steps you can take to enhance your creditworthiness:
- Start by reviewing your credit report for inaccuracies and address any discrepancies promptly.
- Timely bill payments and responsible credit card usage positively impact your score.
- Work hard to reduce your existing debts and avoid new credit applications.
Patience is key, as rebuilding credit takes time, but the long-term benefits are well worth the effort.
